17 Responses to “Greece: RIP”

German banks may have lent recklessly to Greece, but Greek government, consumers and businesses also borrowed recklessly as they cheated and lied their way into Europe.

Europe cannot live peacably together. It’s a simple historical fact. The period 1945-2011 was an aberration. Prior to that Europe had been throwing spears at each others, then shooting each other for centuries past. There are too many countries who hate each other for a European project to ever work.We should be asking why is war so extraordinary and if the price of patching up Europe’s differences in the 60 years since 1945 is what we are about to see then Europe is in trouble again..

For 60 years we’ve been told, particularly by those in the US, that democracy & capitalism go hand-in-hand. Since about 1990 a crew of R-W idealogues have assured us that, in fact, capitalism is the ONLY sort of economic model that can fit with democracy.
Now, like all the other economic paradigms posed by those R-W idealogues, this idea has fallen down.
When the USSR invaded Czechoslovakia it persuaded some people that Communism couldn’t accept democracy.
Now the EU have entirely colonialised Greece it persuades me that Capitalism can’t accept democracy.
The difference is that I believe a form of social capitalism can be democratic, but, lest we’re in doubt, what must survive is the democratic principle NOT the economic model.

Even banks don’t really benefit from this deal. They are being asked to take an loss of 75% on NPV of their Greek bond holdings, after all. Yes, anything in trading books should already be marked to market, so the haircut on those may be less than the losses already recorded – although certain French banks (which actually hold more Greek debt than German banks do) have been “marking to model”, which gives a much more rosy view of the bonds’ value. More fool them. But anything in banking books is probably valued on an amortised cost basis, so they will take the full loss on those.

I can’t see that anyone really benefits from this deal except the Eurozone politicians who have staked their political reputations on the survival of the Euro.

Richard, there is still an unknown quantity in this situation if “the markets” are made to suffer a write-down, or haircut in modern parlance. The extent to which these holdings are covered by Credit Default Swaps has not been clearly established. CDSs are not regulated instruments and it is unclear whether the “insurer” would have the ability to cover these claims. CDSs can be bought and sold by third parties not connected to the original contract with no need to establish Insurable Interest so it is very difficult to assess the full picture as to where the losses may lie.

You will recall that when AIG faced this situation, The US taxpayers had to cover the losses. For those of your readers who wish to know more of the workings of CDSs and CDOs, the link below demonstrates their opacity well.

Richard – do you think that Germany – because, let’s face it, they’re running the show – are piling more debt onto Greece in the hope that it doesn’t recover? After all, imagine the embarassement, and potential ramifications across Italy, Spain, Portgual and Ireland, if Greece were allowed to default, leave the euro AND show signs of growth and recovery – i.e. there would be life after/outside the eurozone.

Politicians aside, I haven’t read a single commentator who thinks this is going to be a solution. But it’s got very little to do with recovering the debts owed to German private banks. Those banks now hold only a small proportion of Greek government debt, and they’re taking a write-down of over 70% on it. See here for the sort of numbers involved – they’re very small compared with the bailout costs.

It ended with people as unaware of the context they live in and how much it’s determined by the banking community as they were when it began. That’s the point of wars, banks profit hugely and the people in it have more immediate concerns than trying to figure out an alternative to the banking system. In the old days an occasional war or a decent plague now and then would turn the minds of the population away from such speculation more than adequately. Now though the presence of the internet and its potential for the rapid dissemination of information means that, from the banks’ point of view, wars are needed pretty much all the time to distract the public. Obligingly, they come.

I don’t think there’s much chance of Greece declaring war on Germany.
Although recent arms purchases by Greece seem to show that internal conflict, leading to military rule, can be expected.
I recommend an eye be turned towards Iran, and kept there. Bear in mind that there are three US carrier groups near there, and hardly a word in the press. Also, consider that Greece has sourced petroleum from there, on credit. And there is now a EU embargo on Iran. So dumping the euro, defaulting on payments and leaving the EU would benefit Greece.